The first thing that stands out in the new budget is that the all-funds budget has declined to just under $200 million, which is amusing in light of the claims from Jose Granda that cited the $248 million all-funds figure as though it were some indication of budget flexibility that does not exist.
As the city press release notes, “The City’s overall budget is $196,146,382, which decreased by approximately $88 million from FY 13-14, mainly due to the removal of capital funds for the wastewater project.”
That point, and the random nature of the original figures, demonstrates that we need to be focused on what is now a $48 million general fund.
As the city press release indicates, the budget “is balanced by using $4.2 million from reserves. Although the Proposed Budget already incorporates $1.2 million in reductions, the current structural deficit needs to be addressed and highlights the gap between revenues and expenditures.”
The need to close that gap is addressed by the council’s placement of “an additional ½ cent sales tax measure (Measure O) on the ballot which will raise $2.7 million in FY 2014-2015 and $3.6 million annually, thereafter.”
The release continues, “Without new revenue, the City has to draw down on its reserve and/or make reductions; this is not sustainable. In the event Measure O does not pass, major program areas, such as community services, transportation, public safety, planning and building and administrative services, will have to make additional reductions upwards of $4 million to programs and staffing.”
Finally, “The City is working on long-term solutions to the General Fund deficit, which include advancing economic development endeavors compatible with community values and continued review of operational efficiencies.”
Measure O comes down, therefore, to a basic question: do you think the budget should be balanced through additional cuts to services and programs or through a six-year marginal increase in the sales tax?
There are several arguments against Measure O that fall flat. First, a half-cent sales tax is almost unnoticeable. If you spend $100 on your purchase, you are paying 50 cents more than you would have. If you spend $1000, you are paying $5 more. Even at $100,000 you would be paying only $500 more.
It will not put Davis at a huge disadvantage in the region. Other areas have relatively similar tax rates: Woodland is 8.25%, Sacramento is 8.5%, West Sacramento is 8.0%, Vacaville is 7.875% and Fairfield is 8.625%.
Again, what does the 0.5% between West Sacramento and Davis amount to? 50 cents for $100, $5 for $1000, $50 for $10,000. In other words, you pay more in gas and wear on your car to shop in other cities based on the actual price difference. And, by the way, if you buy a car, you pay Davis’ tax rate regardless of where you purchase it.
To me, this simply comes down again to a trust issue. Has the city since 2010 done enough to earn back your trust? Maybe they haven’t. The city did mismanage its budget from 1998 until 2008 by adding huge unfunded liabilities and balancing its budget through deferring infrastructure maintenance.
From 2008 until 2011, the council attempted to deal with the economic crisis by cuts through attrition, marginal structural changes, and more deferred maintenance.
On the other hand, this election marks the first time after six years of cuts that the city is asking for new and increased taxes.
Unlike the schools, which hit up the taxpayers five times for either renewals or increased taxes, this marks the first such endeavor for the city. The city has in that time eliminated 110 positions – most by attrition, representing 24% of the current workforce.
The city in its transmittal argues, “Its effects may not always be evident to the public, but it is fair to say the City’s service levels have been affected and the city’s ability to fund capital expenses has also been diminished.”
The city argues its structural deficit is about $5 million. As we have shown, that number is on paper only. It includes some infrastructure needs, but not all. We believe the city needs to spend $5 to $8 million on roads – the $5 million figure assumes only about $2.5 million, of which only $1 million is covered by Measure O. That figure doesn’t include parks or building infrastructure needs, which could be sizable.
A December 17, 2013 staff report revealed that “if the City continued its existing service levels with no significant new source of revenue, its general fund reserves would be completely extinguished by the end of the FY 14/15 budget year,” Yvonne Quiring wrote in the City Manager Transmittal to the budget. “Allowing the reserve to be extinguished is unthinkable as it would negatively impact the City’s credit rating; it would provide no margin for dealing with contingencies and emergencies; and it would result in more major reductions in FY15/16 and beyond.”
The bottom line is that if Measure O passes, the city will still have to cut about $1.2 million from the budget. As Ms. Quiring notes, the $1.2 million in general fund reductions are already built into the budget, they “were recommended by staff, endorsed by the Council and included in the FY 14-15 Proposed Budget.”
The city is looking into longer term economic development strategies designed to generate additional revenue. As we know, there are potential business park proposals east of Mace and west of Sutter-Davis. We also evaluated Nishi, which could generate 1600 to 1700 new jobs. And there is the potential half million in revenue at the proposed Hotel-Conference center.
As Ms. Quiring writes, “If Measure O fails to pass, the impact of not having the new sales tax revenue available will require significant expense reductions beyond those already identified within the proposed Budget [which] will need to be considered immediately.”
Staff has laid out a 12.5% cut across the board scenario, and what I believe to be more likely, a 25% cut to non-safety departments.
We have already seen a pool closed; will we also see parks and greenbelts closed? What will the city look like?
The citizens of Davis will get to choose these options on Tuesday. Unfortunately, what was asked for will not address most of the roads costs, parks, and building infrastructure. We may or may not see another tax measure in November – a parcel tax – that attempts to address that.
—David M. Greenwald reporting